Onni Group is in trouble over a $408m loan related to the Wilshire Courtyard office complex on the Miracle Mile, real deal Learned.
Commercial mortgage-backed securities loans from Natixis have been special serviced ahead of schedule and are expected to mature in July, according to Trepp and Morningstar Credit Information and Analytics. Onni Group did not respond to a request for comment.
Onni has the option to extend the loan for another year, according to Morningstar data. However, this option requires the building to earn 1.1 times the monthly debt service – a requirement that Onni currently does not meet, thus triggering the special debt service.
Onni buys 1M sq. ft. office building at 5750 Wilshire Boulevard $630 million In 2019, took it over from Tishman Speyer. A few months later, it took WeWork as its anchor tenant, taking about 32 percent of the space — a deal that was hailed as a victory for Onni, given WeWork’s $47 billion valuation at the time.
That same year, Onni negotiated a CMBS loan and a $69.4 million mezzanine loan with Brookfield, according to a DBRS Morningstar report.
But the timing was wrong. A few months later, WeWork co-founder Adam Neumann was ousted as CEO after a failed attempt to take the company public. WeWork vacated the entire 335,000-square-foot lease through 2022.
With a campus vacancy rate of about 46% by the end of 2022, the company reported net cash flow of $20 million, down from $30.2 million when it issued the CMBS loan, according to Morningstar data.
Since then, it has been a rollercoaster ride for the property to lease, as well as income.
The property got a big boost in January when Sony Pictures signed an agreement to lease 225,000 square feet of the building.
But three months later, the loan’s special servicer said two anchor tenants – Media Brands Worldwide and Sky Dance Media – were expected to vacate the property when their respective leases expire later this year. Together, the two occupy 165,000 square feet of space. Neither company responded to a request for comment.
However, unlike many office landlords with variable-rate debt, Onni has not felt the pain of rising interest rates because it bought the rate cap when it took out the loan in 2019.
Loan data shows that Onni has been paying a 3.75% interest rate on the loan since July last year, which translates to about $1.3 million in monthly interest or $15.6 million a year.
